Court Revives Age Bias Case Related to Health Benefit Costs

October 24, 2014 (PLANSPONSOR.com) – A federal appellate court has revived a lawsuit in which a woman claims she was fired from her job due to her age and how that affected the company’s health care costs.

The
8th U.S. Circuit Court of Appeals reversed a district court’s decision in
Marjorie Tramp’s Age Discrimination in Employment Act (ADEA) claim. The
district court granted summary judgment in favor of Tramp’s former employer,
Associated Underwriters, saying Tramp’s evidence demonstrated that age and
health care costs were analytically distinct in the case. However, the
appellate court found that correspondence between Associated Underwriters and
its insurance carrier before Tramp’s termination showed it was apparent to
company management that its health care premiums were affected by the
demographics of its employees.

The
court said it is possible that certain considerations such as health care costs
could be a proxy for age in the sense that if the employer supposes a
correlation between the two and acts accordingly, it may have engaged in age
discrimination. “Here, it is possible that a reasonable jury could conclude
from the evidence that Associated Underwriters believed the two considerations
were not analytically distinct,” the 8th Circuit wrote in its opinion. The court
said summary judgment prematurely disposed of the issue.

In
2008, Associated Underwriters faced economic difficulty and management decided
to pursue cost-saving measures for its health benefits. It sought quotes from
different providers, and one came back much lower than the others. Management
investigated and found out that insurer had not included Tramp and another
employee because they were older than 65. The insurance company said people
older than 65 “usually don’t get quoted” because they are Medicare eligible.
Management asked the insurer to provide a quote including the two employees,
and hired that company as its health benefits provider.

Correspondence
between management and the insurance company over time showed that each time an
employee who was older or “sicker” left employment, United Underwriters would
ask the insurance company to reconsider its rates. According to the court, it
was clear that Associated Underwriters was seeking other bids for insurance
when management said in one correspondence, “We have lost several of the older,
sicker employees and should have some consideration on this.”

In
addition, management met with Tramp and the other employee who was older than
65 and suggested they utilize Medicare instead of the company’s health plan.
Both refused.

The
employer showed evidence that during the same time frame, Tramp was formally
reprimanded for poor performance. In February 2009, Associated Underwriters
underwent a reduction in force, and Tramp as well as the other employee older
than 65, and other employees, were laid off. Management said its
decision about who to lay off was made based on performance.

In
July 2009, email correspondence between management and the company’s health
insurance provider showed the company was disappointed in its receipt of a
higher renewal rate. In an email, management said, “Since last year we have
lost our oldest and sickest employees, [names, including Tramp’s, were shared].
Please let me know if this is the best we can do… we were expecting a rate
decrease from the group becoming younger and healthier, not an increase.”

The
8th Circuit said, at the very least, the email language was a crude and
insensitive way to describe employees, but also, there remains a possibility
that the statements could be a manifestation of intent in the process used to
lay off its oldest workers.